Under Texas Law, The Policyholder’s Rights to Recover For A Loss Are Not Necessarily Extinguished By A Subsequent Foreclosure

On November 27, 2013, an intermediate level Texas court handed down an opinion addressing the extent to which a policyholder’s claims for a covered loss survive foreclosure.  Peacock Hospitality, Inc. v. Association Casualty Ins. Co., 2013 WL 6188597 (Tex.App. San Antonio) arose after the policyholder Peacock Hospitality (“Peacock”) made claim against its property insurance carrier, Association Casualty Insurance Company (“Association Casualty”), for water damage from frozen pipes at a Holiday Inn.  The loss occurred on January 9, 2010. The policyholder had gone into default on its mortgage several months earlier, and the mortgagee (the “Bank”) sent Peacock a notice of acceleration and foreclosure on January 28th. On February 11th, Association Casualty tendered a check made payable to Peacock and the Bank…